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Dear Daily Crux reader, If you're interested in precious metals, this could be the most important interview you'll read this year. It's with our colleague Matt Badiali, editor of the S&A Resource Report. Matt recently gave his subscribers some incredible news: One of the most powerful "buy signals" for silver just triggered. This signal has never been wrong – and those who followed it have never lost money – during the entire bull market. To get the details on how this signal works and why it's so reliable, read on… Good investing, Justin Brill Managing Editor, The Daily Crux www.thedailycrux.com |
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The last time this happened, The Daily Crux: Matt, you recently alerted subscribers to a "rare and powerful" buy signal in silver. Could you share the details with us? Matt Badiali: Sure, I'd be happy to. The signal itself is pretty simple. It's basically just a measure of what the "big money" traders are doing in the silver market. But it truly is rare and powerful. It's only occurred five times in the past 10 years since the precious metals bull market began. But if you had bought silver each time it was triggered, you would have made money every single time. The last signal came in early 2009, and silver went on to gain over 400% – 407%, in fact – before peaking last spring. Now, it has triggered again this summer… And if history is any indication, we could see another big rally starting soon. Crux: How does the signal work? Badiali: The signal is based on data from the "Commitment of Traders" report from the Commodity Futures Trading Commission, or the CFTC. This report is released each week for various commodities. It shows the current positions held by the different participants in each commodity. By following these reports, you can see who is buying and who is selling… and track the flow of money in individual commodities. There are two main groups of participants in the commodities markets: the commercial hedgers – known simply as the "commercials" – and the non-commercial traders, or "non-commercials." Commercials include the folks who produce and use commodities, like farmers, miners, and utility companies. Non-commercial traders are the big speculators, like hedge funds and wealthy individual traders, who are in the markets purely to make money on changes in commodity prices. The net positions – which take into account the total number of long and short positions – of each of these groups are tracked separately. The commercial traders are often known as the "smart money," because they tend to get the big market swings correct. They're not perfect, of course, but because they're actually producing or consuming the commodities rather than speculating, they're less likely to make the mistake of buying at high prices or selling at low prices. The non-commercial traders, on the other hand, are often called the "dumb money," because they tend to buy at big market tops and sell at big market bottoms. The behavior of this group at extremes is more reliable. And it's the basis for our silver buy signal. Crux: So how exactly is a buy signal triggered? Badiali: Well, the details can get a little complicated, but here's the important point: Whenever the net position of non-commercial traders has fallen below a certain level – 11,000 contracts, to be specific – silver has soared. When this signal flashed in 2003, silver rallied 85% in a year. The next signal in 2005 resulted in a gain of 113%. The third in 2007 sent silver up 76% in about six months. And in 2009, it kicked off a two-year, 407% rally. ----------Advertisement--------- How to collect real "hold-in-your-hand" silver from your local bank A wild loophole could enable you to get real, "hold-in-your-hand" silver from practically any bank in the U.S… as part of a totally free transaction. Click here for the full details. --------------------------------- Crux: Four-for-four is an impressive record… What makes the signal so reliable? Badiali: It's reliable because it takes advantage of one of the most important market indicators available: sentiment. When the non-commercial traders – the "dumb money" – own a very low net position in silver, it means the average trader literally doesn't want to own it. He has sold his position or has gone short, meaning there are few positions left to sell. By definition, when there are few positions left to sell, there is little "ammunition" left to push the market lower. This type of extreme negative sentiment is almost always a sign that a bottom is near. It is important to note that this isn't a short-term trading tool, though. Prices could go lower still before turning around. But history says this is a time to be buying. Crux: How high could silver rally this time? Badiali: Well, it's impossible to know for sure, but we can look to the previous signals for some possibilities. For example, if silver were to match the smallest gains we've seen from the signal in the past 10 years, we could see a return to its recent highs near $50 per ounce. If we were to get a repeat of 2009's 400%-plus rally, we could see new all-time highs above $80 per ounce. Naturally, there are no guarantees in the markets, but everything I see suggests silver is a strong buy right now… And I'm putting my money where my mouth is. I've been buying more bullion coins for the first time since 2006. Whether you're new to the silver market or have been accumulating for years, this could be one of your best chances to buy more. Crux: Thanks for talking with us, Matt. Badiali: My pleasure. |
Editor's Note: You're likely to do well buying silver today… But if your goal is truly spectacular gains, it's not your best bet. Instead, Matt says you should be looking to high-quality silver stocks. After the last buy signal in silver, several of these stocks multiplied in value 10-fold. Earlier this month, Matt made his first recommendation from this group, and S&A Resource Report readers are already up over 20%. If you missed this pick, it's not too late… Matt will have a brand-new silver recommendation in the next issue of the S&A Resource Report, due out this week. To be among the first to receive it, click here. |
Sunday, 2 September 2012
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